Eastern Europe's Economy Grows Robustly in 2026 – wiiw Sees Poland as EU Leader

According to the wiiw, the economy is driven primarily by private consumption, supported by real wage growth. Added to this are EU funding and investments in the defense industry, which are additionally fueling growth in the CEE states. The researchers do not currently see another inflation shock.

Austria's Exports Rise Sharply

The Austrian economy is also benefiting directly from the dynamism in the region. In the first quarter of 2026, Austrian exports to the Czech Republic rose by 4.4 percent, to Croatia by 10.6 percent, and to Serbia by as much as 16.5 percent. Austrian construction companies are among the largest players in Central, Eastern, and Southeastern Europe, particularly in the energy infrastructure and water sectors.

Richard Grieveson, deputy director of the wiiw, sees additional opportunities for Austrian firms in the reconstruction of Ukraine. "Voraussetzung dafür ist allerdings, dass der Konflikt mit dem Iran nicht neuerlich eskaliert, die Straße von Hormuz offen bleibt und sich die Energiemärkte normalisieren", sagte Grieveson. In the medium to long term, the reconstruction of Ukraine offers a platform for Austrian expertise, particularly in energy infrastructure and water treatment.

Opportunities in the Reconstruction of Ukraine

Not all countries in the region are following the positive trend, however. Romania is slipping into recession with an expected minus 0.1 percent – the result of government austerity policies following high budget deficits. Slovakia will only manage minimal growth of 0.5 percent in 2026. For Hungary, the wiiw raised its forecast for 2027 significantly by 0.8 percentage points to 2.6 percent.

The six Western Balkan states of Albania, Bosnia-Herzegovina, Kosovo, Montenegro, North Macedonia, and Serbia are expected to grow by a combined 2.5 percent in 2026, according to the wiiw. For Turkey, the economists expect an increase of 3.3 percent. Growth markets such as Kazakhstan, Turkey, and Bulgaria open up new sales opportunities for Austrian firms, even though they have so far had little presence there.

Russia in Crisis

While the CEE states as a whole remain robust, Russia is suffering from a severe crisis according to the wiiw's assessment. For 2026, the researchers lowered their growth forecast by 0.3 percentage points to a minimal increase of 0.6 percent; for 2027, they expect only 1.3 percent. The institute cites high key interest rates, Ukrainian drone attacks on energy facilities, and internet outages as reasons.

The crisis in German industry, with which large parts of Central European manufacturing are closely intertwined, is weighing on the entire region. Energy prices and inflation are likely to remain higher in the foreseeable future than before the attack by Israel and the USA on Iran, according to the wiiw. Despite these risks, Central, Eastern, and Southeastern Europe remains an important pillar of the Austrian export economy in the institute's assessment.

Ukraine itself is expected to grow by 1.0 percent in 2026 from a very low level – despite Russian airstrikes and the effects of the Iran war. The wiiw sees the country thus on a narrow but recognizable path to recovery, in which Austrian companies could increasingly participate with their expertise in energy and water infrastructure.